I was pretty surprised to hear Elder Cook in Sunday’s last session mention the Kirtland Banking Crisis in his talk. I just finished my 3 part series on this topic! The Banking Panic of 1837 took down 1/3 of U.S. banks and like the 2008 Great Recession, was due to a lot of real estate speculation. Anti-Mormons try to paint Joseph Smith in the worst possible light. I’ve always assumed that Joseph just wasn’t very good with financial matters, but in my discussion with Dr. Mark Staker, I learned that an Ohio man was purposely trying to crash the bank.
Why did Joseph start a bank in the first place? (part 1 listen here)
They could have easily paid off the temple if they had just waited a while and they may have actually been able to pay it off almost immediately if they had just drawn on these resources, but they’re looking to grow the community, and so it’s not just a temple debt that they’re trying to address as much as it is that they want to expand. They want to get in on all this growth that’s happening all over the country. Everybody is getting excited.
Why did the bank fail? (part 2 listen here)
While that charter’s still kind of out in limbo, one of those local opponents of theirs, Grandison Newell, he wants to put the bank out of commission, so he goes up and buys up all the banks notes that he can buy, and he comes in and he asks for specie, which is hard currency, gold and silver coins rather than the paper notes and the bank has to trade for those and so all of this currency, all of this specie that’s in the coffers of the bank in the vault, they’re trading out to Grandison Newell and he’s trying to create a run on the bank.
John Johnson, Sr. loses faith in this whole Kirtland Safety Society enterprise.
Why? I don’t know. Was it a specific incident? Did Joseph insult him? Did he see something that he didn’t trust, in terms of a financial document? Whatever it was, John Johnson, Sr. panics and goes out and begins to immediately sell this property at giveaway prices. He’s giving it to his sons, son in law, family members, also some of his friends and associates and others. He’s getting rid of this property because he wants to be able to get what he can out of it all.
Were you aware of these other factors? John Johnson was the father of apostles Luke and Lyman Johnson, the father-in-law to Orson Hyde, and the uncle of William McLellin. These apostles (as well as a grundle of others) became bitter towards Joseph and vocal critics. Elder Cook also spoke of Orson Pratt, who wasn’t an apostle at that time, but following some disillusionment over Joseph, returned to the church. Brigham Young was one of the few who defended Joseph and both were driven out of town. I can understand the frustration on behalf of depositors; it is the same frustration we felt with the Great Recession of 2008. But given these factors, why did Joseph take the blame? (Listen here for part 3)
People owe Whitney money and Joseph Smith is taking on their debts, and there are quite a few individuals. There is piping for a steam engine pipe for the sawmill that the church is using. They used for Joseph Smith’s temple. Joseph Smith takes on the debts for all of that sawmill construction and I believe that the church still owns that sawmill so it was a church debt, but whoever had taken that on, Joseph Smith is now taking that on himself and he’s gathering all these other debts as well so that he becomes responsible for that.
I think that principally his interest is in settling those debts, making sure that all of it gets settled, and he has specific individuals who were assigned to make sure all of those payments are made and that everybody is paid off in this process, but it also puts him up to be the fall guy when all the debts, when everything collapses, he is the one that’s owing all of this, and so I don’t know if he wants to protect everybody from all of the subsequent lawsuits.
Grandison Newell was able to obtain a conviction on Joseph Smith for running a bank without a charter. (It should be noted that many banks in Ohio and elsewhere also operated without a charter.) Given this information, as well as the fact that the Banking Panic of 1837 had a lot to do with real estate prices collapsing everywhere, how much blame to you lay on Joseph Smith for the failure of the Kirtland Safety Society Bank? How would you react if Pres Monson was president of your bank and you lost all your money?